Anyone starting out on a new business venture needs to understand all the legal and financial elements and requirements of running a business, which may include registering for VAT.
Here is a simple guide to the key facts you need to know about VAT.
What is VAT?
VAT stands for Value Added Tax (VAT).
It is a tax, payable to HMRC, which is levied on most goods and services provided by VAT registered businesses within the UK.
When is VAT charged?
VAT is charged when a VAT registered business sells products or services to another business or non-business client within the UK.
There are three types of VAT:
There are also goods and services that are:
When do businesses have to register for VAT?
A business has to register if its sales for the last 12 months total over £73,000.
How does a business register for VAT?
Businesses can apply for VAT registration online by downloading VAT registration forms from HMRC’s website. (www.hmrc.gov.uk/vat)
What paperwork is required once you’re registered?
Since April 2010, businesses have been able to submit and pay their VAT returns online and pay electronically, but also have the choice to file on paper.
From April 2012, businesses will only be able to submit and pay online, so the HMRC is currently recommending that all businesses register online now and get used to their systems before April 2012.
What information must be included on a VAT return?
A VAT return is typically filed every three months and must detail:
That completes my simple guide to Value Added Tax; What VAT is, who pays it, why and how.
For a step-by step-guide on how to complete each section of a VAT return, visit the HMRC website, or give us a call!
Anita Brook is MD of Accounts Assist (www.accountsassist.co.uk), a chartered accountancy firm offering fixed rate packages and a first rate service.